India must invest more in R&D to win the deeptech race: Peak XV's Rajan Anandan

India’s deeptech ecosystem may be growing fast, but it lags behind global peers due to underinvestment in research and development (R&D), said Rajan Anandan, Managing Director at Peak XV Partners.

Speaking at TechSparks 2025, Anandan warned that while India has the talent, scale, and ambition to compete globally, its spending on research remains far too low to fuel true deeptech innovation.

“India’s R&D spend as a percentage of GDP is 0.7%. China is at two and a half percent, the US is at three and a half, and Israel, South Korea, are at 4%,” he said. “If you put that in perspective, China is spending 10 to 20 times more on R&D than we are.”

He pointed out that deep tech doesn't happen without R&D. “We have to invest dramatically more in R&D to have anything to do with deeptech,” Anandan said.

He explained that India and China were roughly at par in R&D spending until the early 1990s. Since then, China has surged ahead, translating higher public research budgets into leadership across sectors such as quantum computing, semiconductors, and biotech. “What we haven’t had is the R&D dollars—both from the public sector and private sector,” Anandan said. “And that is now beginning to change.”

Anandan pointed to the government’s recently announced RDI (Research, Development & Innovation) Fund, a Rs 1 lakh crore initiative aimed at promoting scientific and industrial research as a major turning point.

“Rs 20,000 crore has already been sanctioned. This is going to go into deeptech fund-of-funds and direct investments into scaling up IIT Madras-like incubators across the country,” he said. “Public sector R&D is finally going to ramp up.”

He called the move a potential “catalyst moment” for Indian science, comparing it to earlier inflection points in digital payments and spacetech. “In 2015, India had two spacetech startups. Today we have 220,” he said. “Our R&D-to-GDP ratio didn’t change, but entrepreneurs built despite the odds. Now, with serious government backing, that acceleration will be much faster.”

Anandan said India’s research infrastructure has pockets of excellence but remains too thinly spread to sustain a deeptech revolution. “IIT Madras Research Park incubated a hundred deeptech startups last year,” he noted. “But we have just one IIT Madras, a little bit of C-CAMP (Centre for Cellular And Molecular Platforms), a little bit of ARPA (Advanced Research Projects Agency), and then not much else. We need 10 or 20 such ecosystems where idea-to-lab-to-commercialisation can happen seamlessly.”

While progress has been visible in select sectors such as semiconductors, where India now has over 30 fabless chip startups compared to none five years ago, and quantum technologies, which have crossed 100 startups under the Rs 6,000 crore India Quantum Mission, Anandan said scale remains the missing ingredient. “Should we have 300 semiconductor startups? Absolutely. But we’ve started, and that’s what matters. It takes 10 to 15 years, but the direction is right,” he said.

The investor, who previously was an executive at Google India, believes the country’s track record offers reason for optimism. “We are never the first or the second,” he said. “Usually, we’re not even the third or fourth. But when we get going, we are the best. It just takes a decade.”

Anandan emphasised that deeptech growth—spanning AI, quantum, biotech, and advanced manufacturing—will be India’s defining challenge over the next decade. “The good news is we have the raw talent and the opportunity,” he said. “What we need now is patient capital and a long-term national commitment to science.”

He added, if the country gets that mix right, India’s next decade could mirror its success in digital payments and space—two sectors that went from obscurity to global leadership in under 15 years. “We’ve started,” Anandan said. “It will take time, but this frontier too, we will win.”